Siemens third industrial profit slightly beats expectations

German engineering giant Siemens reported a slightly better-than-expected industrial profit for its financial third quarter on Thursday as it unveiled details of its new strategy that cuts the number of business divisions.

The overhaul also triggered management changes, with Chief Technology Officer Roland Busch becoming chief operating officer, a signal he could replace CEO Joe Kaeser when he steps down in 2021.

The turbines-to-trains-maker said its industrial profit rose 2 percent to 2.21 billion euros ($2.6 billion) in the three months to the end of June, just ahead of an average forecast for 2.18 billion in a Reuters poll of analysts.

Revenue fell 4 percent to 20.47 billion euros, missing expectations of 20.73 billion euros, but orders increased 16 percent to a better-than-expected 22.8 billion euros.

“Our global team delivered a strong quarter highlighted by outstanding order intake, outperforming the market,” Chief Executive Joe Kaeser said in a statement.

Siemens shares were indicated to open 0.5 percent lower, while the German DAX index was seen opening down 0.6 percent.

The quarterly results come as Siemens announced a new strategy to increase profitability by targeting growth in the digital industry, electric mobility and the internet of things.

The strategy, labelled Vision 2020+ will reduce the number of industrial divisions from five to three to simplify the company and make it more responsive to customers.

Under the changes, Siemens said it expects to increase the annual growth rate and profit margin of its industrial business by 2 percent over the medium term — defined as the next three to five years.

The company is now targeting an industrial business margin of 11 to 15 percent.

Under the management changes, Lisa Davis, the head of Siemens struggling power and gas division, will take charge of the new Gas and Power operating company with Siemens seeking to extend her contract.

During April-June the Power and Gas business reported a 56 percent slump in profit, with Siemens citing “ongoing adverse markets” as customers switch from fossil fuels to renewable energy sources.

During the quarter it sold only five large gas turbines, and Siemens said there could be further declines in the market.

But the downturn was compensated by the continued strong growth in Siemens Digital Factory industrial automation unit, which delivered the fastest profit increase of all Siemens industrial businesses.

The division, the jewel in Siemens crown, increased profit by 54 percent during the quarter, helped by strong growth in revenues China and the United States.

Source: Reuters